Chinese Banker: Investors' Hunger for Gold Abates

Investors' demand for gold bullion in China, the world's biggest consumer of the metal, has steadied this year as they have become unsettled by slowing economic growth, an executive of the country's largest gold retailing bank said.

Trading enthusiasm for bullion has eased from the scorching rate of the last few years as investors have become wary of the price volatility brought by economic uncertainty, said Zheng Zhiguang, general manager of the precious metals department at the Industrial and Commercial Bank of China (ICBC).

Physical gold sales at the bank so far this year have been flat from a year earlier, he said.

In 2011, ICBC sold 55.4 tonnes of gold and 74.64 tonnes of silver, up dramatically from 28.01 tonnes of gold and 33.09 tonnes of silver in 2010.

The Chinese gold market still has "huge potential" for growth, Zheng said on Monday in an interview.

"Steady economic growth, increasing income, the launch of new products as well as a maturing and expanding market, will drive this market forward," Zheng told Reuters on the sidelines of the London Bullion Market Association (LBMA) conference. "China's market has just started."

A growing number of gold investment tools have been launched to meet demand from Chinese consumers, who have traditionally have favoured holding physical gold.

ICBC's gold accumulation plans, which allow individuals to invest a small amount in gold each month and eventually take physical delivery, have attracted 5 million clients, and the bank has accumulated 64 tonnes of gold to back these accounts since their launch about two years ago, Zheng said.

TOP GOLD CONSUMER

In an interview with the online Reuters Global Gold Forum last week, GFMS Chairman Philip Klapwijk said he expected gold demand to grow only 1 percent this year in China, albeit from record levels.

A slowdown in economic growth from the blistering pace of recent years has curbed China's demand for commodities. Its economy slid into its seventh quarter of slowdown in July-September, growing just 7.4 percent.

But China is still set to overtake India as the world's top gold consumer this year, as a weak rupee and higher import tax curb buying interest from India.

As the country becomes increasingly influential in the international precious metals market, members of its gold industry have also become prominent in the global market space.

The number of Chinese refiners on the LBMA Good Delivery List, the most widely recognised register of approved gold producers, grew to 22, ranking just behind Japan with 23 refiners, LBMA Chairman David Gornall said.

"This in itself says a lot about the relevance of China to the global precious metal market, and of course this is also reflected in so many statistics of supply, demand and trade in our metals," Gornall told the conference.

He said asset allocation in China "can only go in one direction as the country has only 2 percent of its reserves in the form of gold, compared with the United States at 75 percent".

Investors' demand for gold bullion in China, the world's biggest consumer of the metal, has steadied this year as they have become unsettled by slowing economic growth, an executive of the country's largest gold retailing bank said.